IRS unveils new People First Initiative; COVID-19 effort temporarily adjusts, suspends key compliance programs

IRS unveils new People First Initiative; COVID-19 effort temporarily adjusts, suspends key compliance programs

WASHINGTON – To help people facing the challenges of COVID-19 issues, the Internal Revenue Service announced today a sweeping series of steps to assist taxpayers by providing relief on a variety of issues ranging from easing payment guidelines to postponing compliance actions.

“The IRS is taking extraordinary steps to help the people of our country,” said IRS Commissioner Chuck Rettig. “In addition to extending tax deadlines and working on new legislation, the IRS is pursuing unprecedented actions to ease the burden on people facing tax issues. During this difficult time, we want people working together, focused on their well-being, helping each other and others less fortunate.”

“The new IRS People First Initiative provides immediate relief to help people facing uncertainty over taxes,” Rettig added “We are temporarily adjusting our processes to help people and businesses during these uncertain times. We are facing this together, and we want to be part of the solution to improve the lives of all people in our country.”

These new changes include issues ranging from postponing certain payments related to Installment Agreements and Offers in Compromise to collection and limiting certain enforcement actions. The IRS will be temporarily modifying the following activities as soon as possible; the projected start date will be April 1 and the effort will initially run through July 15. During this period, to the maximum extent possible, the IRS will avoid in-person contacts. However, the IRS will continue to take steps where necessary to protect all applicable statutes of limitations.

“IRS employees care about our people and our country, and they have a strong desire to help improve this situation,” Rettig said. “These new actions reflect just one of many ways our employees are working hard every day to assist the nation. We care, a lot. IRS employees are actively engaged, and they have always delivered for their communities and our country. The People First Initiative is designed to help people take care of themselves and is a key part of our ongoing response to the coronavirus effort.”

More specifics about the implementation of these provisions will be shared soon. Highlights of the key actions in the IRS People First Initiative include:

Existing Installment Agreements –For taxpayers under an existing Installment Agreement, payments due between April 1 and July 15, 2020 are suspended. Taxpayers who are currently unable to comply with the terms of an Installment Payment Agreement, including a Direct Deposit Installment Agreement, may suspend payments during this period if they prefer. Furthermore, the IRS will not default any Installment Agreements during this period.  By law, interest will continue to accrue on any unpaid balances.

New Installment Agreements – The IRS reminds people unable to fully pay their federal taxes that they can resolve outstanding liabilities by entering into a monthly payment agreement with the IRS. See IRS.gov for further information. 

Offers in Compromise (OIC) – The IRS is taking several steps to assist taxpayers in various stages of the OIC process:

  • Pending OIC applications – The IRS will allow taxpayers until July 15 to provide requested additional information to support a pending OIC. In addition, the IRS will not close any pending OIC request before July 15, 2020, without the taxpayer’s consent.
  • OIC Payments – Taxpayers have the option of suspending all payments on accepted OICs until July 15, 2020, although by law interest will continue to accrue on any unpaid balances.
  • Delinquent Return Filings – The IRS will not default an OIC for those taxpayers who are delinquent in filing their tax return for tax year 2018. However, taxpayers should file any delinquent 2018 return (and their 2019 return) on or before July 15, 2020.
  • New OIC Applications – The IRS reminds people facing a liability exceeding their net worth that the OIC process is designed to resolve outstanding tax liabilities by providing a “Fresh Start.” Further information is available at IRS.gov

Non-Filers –The IRS reminds people who have not filed their return for tax years before 2019 that they should file their delinquent returns. More than 1 million households that haven’t filed tax returns during the last three years are actually owed refunds; they still have time to claim these refunds. Many should consider contacting a tax professional to consider various available options since the time to receive such refunds is limited by statute. Once delinquent returns have been filed, taxpayers with a tax liability should consider taking the opportunity to resolve any outstanding liabilities by entering into an Installment Agreement or an Offer in Compromise with the IRS to obtain a “Fresh Start.” See IRS.gov for further information. 

Field Collection Activities – Liens and levies (including any seizures of a personal residence) initiated by field revenue officers will be suspended during this period. However, field revenue officers will continue to pursue high-income non-filers and perform other similar activities where warranted.

Automated Liens and Levies – New automatic, systemic liens and levies will be suspended during this period.

Passport Certifications to the State Department – IRS will suspend new certifications to the Department of State for taxpayers who are “seriously delinquent” during this period. These taxpayers are encouraged to submit a request for an Installment Agreement or, if applicable, an OIC during this period. Certification prevents taxpayers from receiving or renewing passports.

Private Debt Collection – New delinquent accounts will not be forwarded by the IRS to private collection agencies to work during this period.

Field, Office and Correspondence Audits – During this period, the IRS will generally not start new field, office and correspondence examinations. We will continue to work refund claims where possible, without in-person contact. However, the IRS may start new examinations where deemed necessary to protect the government’s interest in preserving the applicable statute of limitations.

  • In-Person Meetings – In-person meetings regarding current field, office and correspondence examinations will be suspended. Even though IRS examiners will not hold in-person meetings, they will continue their examinations remotely, where possible. To facilitate the progress of open examinations, taxpayers are encouraged to respond to any requests for information they already have received – or may receive – on all examination activity during this period if they are able to do so.
  • Unique Situations – Particularly for some corporate and business taxpayers, the IRS understands that there may be instances where the taxpayers desire to begin an examination while people and records are available and respective staffs have capacity. In those instances when it’s in the best interest of both parties and appropriate personnel are available, the IRS may initiate activities to move forward with an examination — understanding that COVID-19 developments could later reduce activities for an agreed period.
  • General Requests for Information – In addition to compliance activities and examinations, the IRS encourages taxpayers to respond to any other IRS correspondence requesting additional information during this time if possible.

Earned Income Tax Credit and Wage Verification Reviews – Taxpayers have until July 15, 2020, to respond to the IRS to verify that they qualify for the Earned Income Tax Credit or to verify their income. These taxpayers are encouraged to exercise their best efforts to obtain and submit all requested information, and if unable to do so, please reach out to the IRS indicating the reason such information is not available. Until July 15, 2020, the IRS will not deny these credits for a failure to provide requested information.

Independent Office of Appeals – Appeals employees will continue to work their cases. Although Appeals is not currently holding in-person conferences with taxpayers, conferences may be held over the telephone or by videoconference. Taxpayers are encouraged to promptly respond to any outstanding requests for information for all cases in the Independent Office of Appeals.

Statute of Limitations – The IRS will continue to take steps where necessary to protect all applicable statutes of limitations. In instances where statute expirations might be jeopardized during this period, taxpayers are encouraged to cooperate in extending such statutes. Otherwise, the IRS will issue Notices of Deficiency and pursue other similar actions to protect the interests of the government in preserving such statutes. Where a statutory period is not set to expire during 2020, the IRS is unlikely to pursue the foregoing actions until at least July 15, 2020.

Practitioner Priority Service – Practitioners are reminded that, depending on staffing levels and allocations going forward, there may be more significant wait times for the PPS. The IRS will continue to monitor this as situations develop.

“The IRS will continue to review and, where appropriate, modify or expand the People First Initiative as we continue reviewing our programs and receive feedback from others,” Rettig said. “We are committed to helping people get through this period, and our employees will remain focused on these and other helpful efforts in the days and weeks ahead. I ask for your personal support, your understanding – and your patience – as we navigate our way forward together. Stay safe and take care of your families, friends and others.”

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NFS URGENT COVID-19 UPDATE

  • Our staff will continue to operate as normal during regular business hours, but our office is closed to our clients and the public.

  • We will continue to be available by phone 800-560-4637, e-mail jeff@nfsnet.com or text 781-406-4070.

  • You may send us your tax documents by uploading to our secure client portal, by mail  or simply putting your tax information in through the mail slot in our front door.

  • Once we receive your information, we will contact you if we have any questions, then call or email you once your tax returns are complete.

  • Rather than physically coming to our office to pick up your tax returns, we will finalize them (signatures, payment for our fee, providing copies to you, etc.) via our secure portal or shipping by UPS or USPS.

As you are aware, life as we know it is rather challenging for the short term. We will keep you updated as we may need to adjust our plans.

HERE IS THE SCOOP ON THE OFFICIAL IRS ANNOUNCEMENT regarding 2019 Tax Filing:

  • The 2019 Tax Filing Due Date HAS BEEN extended 90 days. This means tax returns are due 7/15/2020 without an extension needed. However, we are making every attempt to get returns filed for the normal 04/15/2020 due date.

  • 2019 Tax Payments can also be deferred 90 days. This means you can wait to pay your tax due without penalty or interest. From our understanding, The Massachusetts Department of Revenue will follow suit in this ruling.

  • 2019 Refunds WILL NOT be delayed. This means refunds will be issued as normal.

As always, we are here to help you navigate through the 2019 Tax Season.  Don’t hesitate to call or email, but please be patient as we attempt to respond to your questions and concerns.

We encourage you to stay as safe as possible and wish you continued health during this difficult time in our country.

Jeff

Coronavirus Related Tax Relief

Coronavirus Related Tax Relief

The IRS has officially released relief information related to the payment of taxes due April 15, 2020.  Here is a brief summary of Notice 2020-17.

The Secretary of the Treasury has determined ANY person with a Federal income tax payment due April 15, 2020, is considered affected by the Coronavirus for purposes of this relief.

The due date for making Federal income tax payments due April 15, 2020, is postponed to July 15, 2020.  This relief is limited to up to $10,000,000 for each consolidated group of corporations or for each C corporation that does not join in filing a consolidated return.  This relief is limited to up to $1,000,000 for all other taxpayers.

This relief is available solely with respect to:

  1. Federal income tax payments (including SE tax) due on April 15, 2020, and
  2. Federal estimated income tax payments (including estimated SE tax).

No extension or postponement is provided in this notice for any payment or deposit of any other type of Federal tax, or FOR THE FILING OF ANY TAX RETURN or information return.

As a result of this postponement, the period from April 15, 2020, to July 15, 2020, will be disregarded in the calculation of any interest, penalties, and failure-to-pay penalty.  Interest, penalties, and failure-to-pay penalties will be imposed on any tax above the limits given above.

According to the Commonwealth of Massachusetts Department of Revenue website, the DOR is prepared to follow the IRS in offering similar relief for taxpayers with Massachusetts tax filing obligations. The situation is fluid and things are changing almost daily. Please reach out to the office for further clarification or check out our online updates relating to COVID-19.

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Paying For College CAN Be Less Taxing

Paying For College CAN Be Less Taxing

Education Tax Rules

Parents facing college expenses have several provisions in the tax law to consider. The benefits don’t apply to all, but there is something of interest for many families.

Tax credits

The American Opportunity Tax Credit (formerly The Hope Credit) is available for certain tuition and fees, and it allows you to reduce taxes annually up to $2,500 per student for four years of college. The credit is equal to 100% of the first $2,000 of qualified expenses and 25% of the next $2,000, per student.

The Lifetime Learning Credit covers any year of post-secondary education, with a maximum credit of $2,000, no matter how many students in the family are eligible.

Both the American Opportunity Tax Credit and lifetime learning credits phase out for taxpayers with higher incomes.

Other Education Tax Incentives

Education savings accounts. You may establish an education savings account (previously called an education IRA) with a nondeductible contribution for any child under 18. The annual contribution limit is $2,000. Funds can accumulate and be paid out tax-free for qualified college expenses, including tuition, fees, books, supplies, equipment, and certain room and board costs. The funds can also be used to pay for elementary and secondary (K-12) school expenses at public, private, or religious schools. Eligibility for an education savings account starts phasing out at $95,000 of AGI for single taxpayers and $190,000 for married folks.

Individual retirement accounts (IRAs). Existing IRAs can also be a source of college funds. You may make withdrawals before age 59½ without penalty for amounts paid for college or graduate school tuition, fees, books, room and board, supplies, and equipment.

Education savings bonds. Interest on Series EE and Series I bonds issued after 1989 is nontaxable when used to pay tuition and fees for you or your dependents. This tax break begins to phase out once income reaches certain levels.

Section 529 plans allow individuals to set up an account on behalf of someone else (say a child or grandchild) that can be used to pay college expenses. There are two types of plans:

Prepaid tuition plans are designed to hedge against inflation. You can purchase tuition credits, at today’s rates, that your child can redeem when he or she attends one of the plan’s eligible colleges or universities. Both state and private institutions can offer prepaid tuition programs. Using tuition credits from these programs is tax-free.

College savings plans are state-sponsored plans that allow you to build a fund to pay for your child’s college education. Your contributions are not tax-deductible, but once in the plan, your money grows tax-free. Provided the funds are used to pay for qualified collegeexpenses, withdrawals are tax-free. Qualified expenses include tuition, fees, books, supplies, and certain room and board costs. Private institutions are not allowed to set up college savings accounts.

If you are looking for an alternative to 529 Plans to save for college education, something that will not be reported on FAFSA, please contact me to discuss.

Student loan interest deduction. Interest on certain student loans can be deducted whether or not you itemize your deductions. The maximum deduction is $2,500 per year over the loan repayment period and income phase out rules apply here as well.

Other tax benefits. Most scholarships remain tax-free, nontaxable employer-paid tuition may be available, and education expenses related to your job still may be deductible.

When you start examining your situation, remember that many of these provisions are designed so that you can’t benefit from more than one in any given year. We can help guide you through the maze and help ensure that you receive the maximum possible benefit.

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